Correlation Between Hubeiyichang Transportation and Loongson Technology

Can any of the company-specific risk be diversified away by investing in both Hubeiyichang Transportation and Loongson Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hubeiyichang Transportation and Loongson Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubeiyichang Transportation Group and Loongson Technology Corp, you can compare the effects of market volatilities on Hubeiyichang Transportation and Loongson Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hubeiyichang Transportation with a short position of Loongson Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubeiyichang Transportation and Loongson Technology.

Diversification Opportunities for Hubeiyichang Transportation and Loongson Technology

0.79

Correlation Coefficient

Hubeiyichang Transportation  Loongson Technology

Poor diversification

The 3 months correlation between Hubeiyichang and Loongson is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hubeiyichang Transportation Gr and Loongson Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loongson Technology Corp and Hubeiyichang Transportation is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hubeiyichang Transportation Group are associated (or correlated) with Loongson Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loongson Technology Corp has no effect on the direction of Hubeiyichang Transportation i.e., Hubeiyichang Transportation and Loongson Technology go up and down completely randomly.

Pair Corralation between Hubeiyichang Transportation and Loongson Technology

Assuming the 90 days trading horizon Hubeiyichang Transportation Group is expected to generate 0.6 times more return on investment than Loongson Technology. However, Hubeiyichang Transportation Group is 1.66 times less risky than Loongson Technology. It trades about -0.1 of its potential returns per unit of risk. Loongson Technology Corp is currently generating about -0.11 per unit of risk. If you would invest  548.00  in Hubeiyichang Transportation Group on December 2, 2024 and sell it today you would lose (57.00) from holding Hubeiyichang Transportation Group or give up 10.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Hubeiyichang Transportation Gr  vs.  Loongson Technology Corp

Hubeiyichang Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hubeiyichang Transportation Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Loongson Technology Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loongson Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hubeiyichang Transportation and Loongson Technology

The main advantage of trading using opposite Hubeiyichang Transportation and Loongson Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hubeiyichang Transportation position performs unexpectedly, Loongson Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Loongson Technology will offset losses from the drop in Loongson Technology's long position.

The idea behind Hubeiyichang Transportation Group and Loongson Technology Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.